Transformational vs. Transactional Leaders, Which is More Effective?

By Anjali Seefeldt

What do Mohandas Gandhi, Vince Lombardi, and Steve Jobs have in common? They are all considered to be transformational leaders. Transformational leaders are inspirational visionaries; they are deeply passionate, energetic, and enthusiastic, which is contagious and extremely motivating to followers. They are charismatic individuals who are innovative, strategic thinkers, often able to achieve great success or accomplish large scale change. Transformational leaders lead in a way which compels followers to dedicate themselves and work hard towards a cause, goal, or purpose.

Transformational leadership, which research has shown is linked to leadership effectiveness, involves an emotional connection between the leader and followers. Transformational leaders are able to effectively gain trust by demonstrating confidence and self-determination while creating an optimistic and compelling vision for the future. Followers tend to identify with the leader (in terms of values, goals, and ideals, for example), which results in greater commitment and cohesion. This translates into a desire for followers to become more invested in achieving goals tied to the vision. A strong transformational leader can help shape the attitudes, motivation, and ultimately, the performance of followers (Castro, Perinan, & Bueno, 2008).

Transactional leaders on the other hand, reward followers for compliance with their directions and/or requests. Followers are recognized for performance, and the relationship between leader and follower is more exchange-based, focused on reward and punishment as motivators. It is common for transactional leaders to be risk-avoidant and function in accordance with the present state of the organization, rather than looking towards the future in the hopes of achieving something greater. Concentrating more on day-to-day operations and efficiency, transactional leaders are less visionary than transformational leaders (Boga & Ensari, 2009).

The four characteristics of transformational leadership, identified by Bass (1985):

Idealized Influence/ Charisma (II) – leading by example; building trust and respect; never asking followers to do things they aren’t willing to do themselves

Intellectual Stimulation (IS) - promoting creativity, innovation, and contribution from all followers; challenging the status quo to develop better ways of doing things; creating opportunities for learning and development

Individualized Consideration (IC) – supporting and encouraging all followers; focusing on helping every member of the group succeed; recognizing individual contributions

Both transformational and transactional leaders can be useful in different situations, and in positions suiting their leadership style. Transformational leaders are most effective as CEOs, or in roles in which big picture thinking and grand strategic vision is beneficial. Transactional leaders tend to be more successful in roles that are focused on detail and the implementation of strategy, such as a front-line supervisor. It’s always best to have a well-balanced leadership team, comprised of individuals with strengths in different areas. Therefore, the most effective type of team may be one in which transformational and transactional leaders are working together towards a common goal.